Energy Storage at Grid Scale: A123 Gets Li-Ion to Market

Eric Wesoff is Editor-at-Large at Greentech Media. Prior to joining GTM, Eric Wesoff founded Sage Marketing Partners in 2000 to provide sales and marketing-consulting services to venture-capital firms and their portfolio companies in the alternative energy and telecommunications sectors. Mr. Wesoff has become a well-known, respected authority and speaker in these fields.

His expertise covers solar power, fuel cells, biofuels and advanced batteries. His strengths are in market research and analysis, business development and due diligence for investors. He frequently consults for energy startups and Silicon Valley's premier venture capitalists.

As we've discussed before, there is a lack of regulatory clarity when it comes to energy storage. Regulatory agencies like the FERC don't oppose storage -- they are looking to public comment and utilities to drive their policy.

While the FERC collects opinions and considers how storage should best be classified and regulated, pioneering entities like AES with batteries from A123 are deploying grid-tied utility-scale energy storage in real-world, non-demonstration projects.

Importantly, the projects are generating revenue.

I spoke with A123 VPs Chris Campbell (Marketing and Business Development) and Andy Chu (Marketing and Communications) at the ESA event.

A123 (NASDAQ: AONE) builds nanophosphate lithium-ion batteries and systems for the transportation, electric grid, and commercial markets. The corporate revenue mix is 50 percent transportation, 40 percent grid, and 10 percent consumer. That might not have been the original vision of A123's initial business plan -- but business plans have to change when business environments change.

As far as the battery technology winner, Chu sees it as a two-horse race between Li-ion and Sodium Sulfur (NaS), with NGK as the "grandfather in the space." EPRI, the Electric Power Research Institute has suggested that the steep scale-up in lithium-ion electric vehicle applications will drive down the price of that battery technology and allow it to lead in the utility-scale race.

A123 will have 100 megawatts of energy storage online by the end of the year in commercial and pilot projects, according to Campbell.

The 100 megawatts include at least four projects in partnership with Independent Power Producer (IPP) AES Energy Storage. Here's a list of some of A123's current projects:

There are two projects in Chile. One of the projects is a 20-megawatt storage system supplied to AES Gener for its 500-megawatt plant in Chile acting as spinning reserve. In 2009, A123 and AES began commercial operation of a 12-megawatt spinning reserve project at AES Gener’s Los Andes substation in the Atacama Desert in Chile. It continuously monitors the condition of the power system and if a significant frequency deviation occurs -- say, the loss of a generator or transmission line -- the energy storage system can provide up to 20 megawatts of power nearly instantaneously. This output is designed to be maintained for 15 minutes at full power, allowing the system operator to resolve the event or bring other standby units online.

A frequency regulation project at an AES generation plant in Johnson City, N.Y. It's the first of its kind to be classified as a generator by the FERC for emissions-free reserve capacity to the power market operated by the New York Independent System Operator.

A 32 megawatt-hour demonstration program with Southern California Edison (SCE) partially funded by the DOE ARRA program to potentially work with the 4,500 megawatts of wind energy coming from Tehachapi wind projects.

DTE has a 500-kilowatt/250-kilowatt-hour demonstration project.

Note that A123 is not just selling a battery -- they're selling a turn-key system. Because A123 has been building EV storage packs for transportation applications, they've learned that 30 percent or more of the cost is devoted to balance-of-system. They suggest that grid-based energy storage systems would require a higher percentage of balance-of-system.

There seems to be a shift in the electrochemical utility-scale storage market -- commercial activity genuinely seems to be coming online in a meaningful way. We'll continue to report from this show.